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How to start a car hauling business

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GOFORITAPP.COM has loyal users who are willing to share their experience of how to start the car hauling business. In this series of posts you will find the list of necessary steps to get into the car hauling business, how to pick up the right truck, what issues should you expect, and how to deal with them.

A car hauling business could be an option for you if you seek to start something that promises quick revenues from the very first day of operation. However, it involves taking into account a number of regulatory rules and procedures that can be time-consuming, exhausting, and expensive.

There are many companies that can help new entrants in the car hauling business in the registration process, but usually, it costs a couple of thousand and not everyone is ready to spend so much money upfront.

I have to warn you that getting insurance really is the most worrisome step for new entrants.

Now let’s get to the list of what you need to consider to start up auto hauling business:

  1. Register a company (LLC, Corporation). In fact, there are more options than just LLC or Corporation but I recommend those two if you want to enter the car hauling business. Corporations would be better if you have more ambitious plans in the future, for example, if you believe that soon you will be adding new vehicles and new drivers to the company. Note that there are C corp and S corp. S corp is almost the same as LLC in terms of taxation, you can always switch from C corp to S corp and back. Maybe S corp is a good idea to save tax money because unlike S corp C corp pays dividend tax. However, if you plan to issue a number of shares (Why not? Plan big!) and attract investors in the future C corp is the only option. Once you register the company now go to the IRS website and get TAX ID, known as EIN or FEIN number. They all are the same. The process is easy, you will get PDF with a tax ID number at the end.
  2. Apply for ICC/MC authority and DOT. These two are done by one application on the DOT website (www.fmcsa.dot.gov). By the way, you need to spend lots of time reading stuff on that website before you go ahead. And I recommend you do so. So there is one but lengthy application to complete to apply for MC authority and DOT number and as you are a first-time applicant it is called UNIFIED REGISTRATION  SYSTEM (URS). Do not confuse it with UNIFIED CARRIER REGISTRATION (UCR) However you need both, I will explain UCR below. You get the DOT number automatically at the end of the application and it is FREE, however, you need to pay $300 to submit an application for MC Authority. Note that the Fee is not refundable and you need to pay close attention to the details of what you are filing in. As a car hauler, you need to indicate in the application that you will be carrying gasoline as NON-BULK. This means that vehicles you are supposed to transport have gasoline in tanks, but you are not transporting gasoline as the main commodity. NOTE that you need to register as a COMMON CARRIER OF MOTOR VEHICLES. Do not make mistakes and do not end up as DRY VAN or HOUSEHOLD GOODS CARRIER COMPANY :))) However, if you make a forgivable mistake you have time to go online and update your MC registration. Form -150 is required which is also found on the FMCSA website.

GET READY!! you will receive lots of “TERRIFYING” SOLICITATIONS, BECAUSE YOUR CONTACT INFO BECOMES PUBLIC ON FMCSA WEBSITE (BTW GO HERE AND LOOK HOW SIMILAR COMPANIES LOOK http://www.safersys.org/CompanySnapshot.aspx. SO DO NOT BE SCARED IF SOMEONE CALLS YOU AND TELLS YOU THAT “YOU ARE AT RISK OF GOING TO FEDERAL PRISON BECAUSE YOU FILED YOUR DOT AND MC NUMBER INCORRECTLY”. THAT’S FUN TO LISTEN TO THOSE PHONE CALLS THOUGH.

3. FINISH this Small but necessary stuff.

a) UCR (ucr.in.gov), known as Unified Carrier Registration, is administered by the state of Indiana. I have no idea why this is needed and I believe you will have the same perception, but you need this in order to do IRP registration (About IRP I will talk below). The process is easy and ONLINE, go to their website (ucr.in.gov) and follow the steps, PRINT RECEIPT OF UCR PAYMENT. It is not expensive for up to 2 trucks it should be no more than $76 I guess. THE RECEIPT IS CONFIRMATION THAT YOU HAVE UCR. So KEEP this receipt in the truck.

b) IFTA registration. IFTA is also easy to process online, it varies from state to state but usually, IFTA registration happens on the STATE SECRETARY website. You fill in the information for which you need your DOT number, your company TAX ID, your TRUCK VIN number, and your TRUCK number plate (if you have a temporary number plate it is fine, you can change it later). The fee for IFTA registration might vary by state but it should not be more than $15-20. I paid $10 in Connecticut. Quarterly you pay  IFTA based on the miles you drove in various states and the locations where you fueled your truck. Also do not forget to put IFTA decals on your truck. That is alerting Weight Stations if you do not have Up to date IFTA decal on the truck. Fine in Virginia for not having IFTA up to date is $500.

c) NYS Highway USE TAX (HUT). Yes, you need it if you operate on the east coast. Also, other states have something similar, just research online this is a simple process. You need the Truck VIN number, Number plate (temporary works) DOT number, and the process is easy on their website (tax.ny.gov/bus/hut/huidx.htm). However, you need to file quarterly and you need to keep track of the miles you drive on NYS highways. The filing fee can only buy you Big Mac, so I do not even remember exactly how much it is.

d) Heavy-Duty Highway Use tax. If your truck’s gross weight is over 55 000 pounds you need to file and pay this tax (irs.gov/uac/about-form-2290). I myself never had trucks rated more than 40,000 pounds but I believe paying HUT is easy to process and administered online.

e) BOC-3, register agent form. This is a one-time thing, when you do your MC authority registration do BOC-3 form filing right away. Google companies that offer BOC-3 filing. The process is online and easy. You pay around 40-50 bucks for getting this type of form, the company where you buy this form will do the rest for you. they will file on your DOT. But make sure to get it because without it you won’t get your MC and DOT activated.

f) You need to do a DOT inspection on your truck in order to get IRP registration completed. Does not matter if your truck is brand new or used you need to take it to the facility where DOT inspection is done. It is easy though and should not cost you more than $150. Some shops might do it for $75, so look for it in your area.

g) VIN verification. This is insane but some STATE DMV IRP units might ask you to provide VIN verification certificate. Dealers do it and DMV has on the website list of approved dealers. I believe only Connecticut DMV requires VIN verification. Basically, the process is as follows: You go to some dealership that is approved to do VIN verification, you pay around $10, and the dealer employee prints out a form where it says that the dealer employee has verified the VIN genuine. Some states make me laugh :)))

4. INSURANCE. This is the most important step in the whole process, I will be honest with you. So once you submit the MC authority application you need to wait around two weeks to buy insurance. OF course, you can buy insurance anytime AFTER MC registration but it is a waste of money, why do you need to pay for insurance in advance and lose two weeks? So FMSCA gives you 90 days to submit insurance. I recommend you to find an insurance company right away which will give you a quote and is ready to file a BC-91 form with FMSCA as soon as you pay the money. As far as you have a new company and car hauling is an extremely risky business for many insurance companies you will have a hard time finding an insurance company that will actually take you. Note that Progressive dropped offering policies to new entrants but then they renewed again. When I did I had to make approximately 50 phone calls to finally find insurance willing to work with me.  And pay attention you do not need to have some CCC rating insurance company, most of the brokers and especially new car brokers require you to have AAA rating insurance company. So as you are a new entrant to the industry insurance premium will be very expensive. Expect to be paying somewhere $1500-2000 a month in insurance. Surprised? This is not all, the Insurance company might request you to pay 25-30% upfront and you pay interest on the rest during the installment period. So once you have paid for an insurance policy the rest is on them, your insurance company should file a BC-91 form with FMCSA in order FMCSA to activate your MC authority. Your insurance certificate will have your TRUCK, your TRAILER, and YOUR name as insured.  FMCSA requires your liability insurance to be at least $1,000, 000 as you transport motor vehicles that has fuel in it and are considered hazardous cargo. Regarding cargo insurance usually, it is $250 000 for 9 car hauler trucks, but depending on what you are hauling you can adjust it according to your needs. For example, I have 4 car hauler trucks but I still carry $250 000 cargo, because I haul new Cadillac Escalades or New Porsche Cayennes, and dealers and brokers requested me to have that much coverage. Also, some companies might ask you to have general liability and workers’ compensation, they are not expensive but it is another process to get them. So be prepared to be asked to provide those.

5. Buying Truck and Trailer. I recommend applying for Truck financing early in the process to get approval and once you have approval you can finish it later and sign papers. I recommend you to get financing on your business, but as it is almost impossible because you have just registered your company then you need to get a truck under your name as an individual. Regarding the trailer, if you are ordering it in the factory, note that they need 1-2 months (sometimes more) to build a trailer for you. So you need to start the process of building the trailer much earlier than other things. However, you can always buy a used trailer. Trailer registration is easy, you will pay sales tax in your state’s DMV. Many people register trailers in the state of Maine online without going there to save on registration fees and sales taxes.

6. IRP registration. Well, this is almost the same as registering your vehicle in DMV, but do not make mistake do not register your truck as a regular COMMERCIAL VEHICLE (If you are above 26,000 pounds). You will lose money. Usually, DMV offices have IRP units. IRP means International Registration Plan. Also some dealers (especially pick-up truck dealers) are unaware of such a process and they fill papers as regular commercial truck registration. So you need to know this and tell the dealer that you DO NOT PAY SALES TAX. IRP registration fee varies by gross vehicle weight. For 80 000 pounds GVW trucks the fee amount is $2000.  To complete IRP registration you need an Insurance certificate mentioning DMV IRP unit as the certificate holder (Your insurance company knows it if you are unaware of how you can put IRP as the certificate holder, so contact them, it is a 1-hour process) It must list all vehicles insured and it must list your individual name as insured if the truck is under your personal name. You will also need a lease agreement between you and your company if your truck is registered in your name and not the company’s. Also, you will need non-trucking insurance in this case. Yes IRP process is also exhausting, time-consuming, and very bureaucratic but you need it to be able to operate interstate. IRP registration is usually completed in 5 days and you will pick up number plates and CAB CARD. Keep CAB CARD in truck all the time. A cab card is the same as a vehicle registration.

This should be all. Now you are ready to pull your first load.

GOOD LUCK AND DO NOT FORGET TO USE GOFORIT APP TO SIMPLIFY THE CAR INSPECTION PROCESS AND EARN EXTRA CASH!

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